The Fundamentals of an Offset Account
An offset account is a clever account because it link’s savings and a loan, normally a mortgage, and uses the savings account to offset the loan. The savings account balance stands in as the figure to be offset from the total outstanding mortgage. The interest earnt on the savings is calculated on a daily (some have monthly) basis, thus ensuring optimum utilisation of even a minimal savings balance. In this schema, therefore funds if lying unused is automatically directed to offset the mortgage payments, while if required are readily available. Moreover, various offset mortgages enable the flexibility of underpayments, overpayment and payment breaks and thus the liberty to clear the loan early, sometimes without incurring early repayment charges.
The outlined details can be understood with a simple numeric illustration. If the total mortgage value is
